Exemption from WHT without recognising the recipient as the beneficial owner

The Supreme Administrative Court (NSA) ruling concerning one of the most problematic issues in the area of withholding tax (WHT), confirming that, in order to apply the WHT exemption, it is not always necessary for the dividend recipient to meet the conditions required to be recognized as the beneficial owner.

The NSA agreed with the position that payers are not obliged to verify whether the recipient of this dividend has the status  of the beneficial owner. The court confirmed that such a requirement does not result from the provisions of Polish laws or  EU regulations. Additionally, the NSA indicated that the obligation to exercise due diligence under WHT cannot be understood as imposing on the payer obligations that do not result from the provisions of law. Verification of the status of the beneficial owner is therefore not within the scope of the payer’s due diligence.

This ruling has a significant impact on the tax security of all Polish companies paying dividends to foreign shareholders. It confirms that they should not be required to verify and document that the recipient of the dividend is its beneficial owner.

The NSA’s decision is particularly important as it counters the unfavourable stance previously presented by tax authorities and administrative courts (e.g., recent NSA rulings in cases No. II FSK 1333/22 and II FSK 1588/20).

This decision is an important step towards widespread adoption of the presented approach and rejects the uncritical reference to EU Court of Justice rulings in the so-called Danish cases in all WHT-related matters.

The attorneys in this case were Łukasz Kosonowski, Bartosz Doroszuk, and Jakub Warnieło.

Judgment of the NSA dated 9 October 2024, case no. II FSK 78/22.